What’s the Best Retirement Investment in 2024?

Want to Know What Your Best Options Are for Retirement Investments? Let Us Help Take the Worry Out of Investing Your Retirement Savings. Learn What the Options Are and Make the Right Investment Choice for You. It Is All Here.
  • Last Updated: 30 Jan 2024
  • Fact Checked
  • Our team recently fact checked this article for accuracy. However, things do change, so please do your own research.

Contributors:

Francis Hui

Key Takeaways

  • The best retirement investments in the UK often include a mix of equities, bonds, property, and pension funds, tailored to your risk tolerance and financial goals.
  • When choosing the best retirement investments, consider diversifying your portfolio, understanding your risk appetite, and seeking professional financial advice.
  • Bonds can be good as they typically provide steady income and low risk, though returns may be lower than other investments.
  • Blue-chip stocks, which are shares in large, well-established companies with a history of reliable performance, often make it the best due to their stability and regular dividends.
  • Mutual funds, specifically those with a track record of stable returns and low costs, are often considered among the best.

Did you know that the most common reason to invest is to save for retirement?

You have put in a lot of effort to save, and now it is time to take money from your pension. 

You will want to ensure that your retirement savings last by making the right mortgage and retirement investments.

Plus, it is never too late to save. 

A successful retirement savings strategy requires striking the correct balance between investment risk and return.

In This Article, You Will Discover:

    We have researched retirement investment opportunities to bring you all the information on the best retirement strategies in 2024. 

    With many expert consultations and hours of research, we have fresh insight.

    Here is what we found out:

    What Are the Best Retirement Investments for a UK Citizen Over 65?

    As UK citizens over 65, we should consider investments with a balance of risk and return tailored for retirement. The best choices include equity income funds, which offer steady income through dividends, and corporate bonds with their fixed interest returns.

    Bonds from blue-chip companies are especially attractive for their relative security. Additionally, consider property investments, either direct real estate or REITs, which can deliver stable rental income.

    Diversification is also crucial at this stage of life. A diversified portfolio can include investments in government bonds, known for their high security, and annuities for guaranteed income.

    Managed funds like multi-asset funds can be beneficial as they spread investments across different asset classes. Lastly, do not overlook the importance of staying invested in the stock market, albeit with a conservative approach.

    Remember, it’s about strategic allocation and balance.

    Best Ways to Invest Your Retirement Savings

    Investing your retirement savings in income-generating investments is 1 of the best options to obtain the most out of your money.

    You will want to invest your retirement savings wisely to make sure that you do not run out of money and get to enjoy your retirement.

    Choosing the Right Investments to Fund Your Retirement

    Choosing the right investments is only part of ‌funding your retirement.  

    You will need to figure out which investing methods are best for you, taking into consideration your objectives.

    Diversification is ‌a good idea. Most people will choose a combination of the options mentioned in this article. 

    It is important to remember with improved life expectancy1 you may retire for 20, 30, 40, or even 50 years. 

    What matters most is that you do not run out of cash. 

    A financial planner can assist you in creating a long-term cash flow plan, but an independent financial adviser (IFA) is a superior choice when it comes to selecting particular investments.

    Construct a Total Return Portfolio

    Constructing a "total return" portfolio means putting money into investments with a long-term strategy in mind2

    The annual return should be equal to or greater than the amount you plan to withdraw over time.

    You should include stocks, bonds, and cash in your portfolio and, ideally, construct it to generate a long-term rate of return of roughly 7% to 10%3.

    To make a total return portfolio work, you will need to reallocate money over time to fit the risk-to-reward ratio4

    Investment Trusts

    Investment trusts are collective investment funds that allow you to invest in a wide range of companies or assets at a reduced cost.

    They can also be a viable option for weathering market volatility. 

    For example, UK investors with diverse portfolios performed better5 than those who were only focused on the home market during the pandemic's chaos.

    An independent board of directors protects investors in investment trusts. 

    Use Retirement Income Funds

    Retirement income funds are a form of mutual fund6

    You contribute money to the fund, which is then managed for you. 

    The managers in this situation will invest your money in a diversified portfolio of equities and bonds. 

    Best of all.

    You put a small amount of money into the account, and the fund managers will take care of the rest, allowing it to grow in value. 

    If you would rather have someone else manage your money and have a few decades to wait, retirement income funds are ideal.

    Purchase Immediate Annuities

    Rather than being an investment, annuities are a type of insurance. 

    The goal of an annuity is to generate revenue to fund retirement. 

    The idea is simple

    You pay a lump sum of money to the annuity provider, and they agree to pay you a fixed amount of money at predetermined intervals. 

    Immediate annuities often start paying you within 1 month7 and are a great option for someone who has enough money to retire and does not want to blow their budget.

    Buy Bonds for the Yield

    A bond is a debt from the government, a corporation, or a municipality. 

    The borrower agrees to pay you interest for a specified period ‌and repay you the money you loaned them (the principal). 

    If you arrange your maturities correctly, the interest income (yield) you receive from a bond can be a stable source of retirement income. 

    Some things you need to know about bonds:

    Companies assign quality ratings to bonds that show whether the issuer will ‌pay the yields and return your principal. 

    Companies that grade bonds include Standard and Poor's Global Ratings, Moody's, and Fitch Ratings.

    There are 3 types of bonds:

    • Short-term
    • Intermediate-term
    • Long-term

    Some bonds have variable interest rates, while others have fixed interest rates.

    An independent financial advisor can guide you further in selecting the best bonds for the yield to purchase.

    Purchase Rental Real Estate

    Rental property, often known as an investment property, can provide a steady stream of income in retirement.

    Property investment is a business, not a get-rich-quick scheme. 

    Rental real estate can be a fantastic retirement investment for people with real estate experience or who desire to put in the time to turn it into a business.

    Nevertheless

    Maintenance expenditures and unanticipated expenses will, of course, need to be accounted for. 

    Before you buy a rental property, you will need to consider‌:

    • Probable costs you will face over the time you estimate to hold it. 
    • Vacancy rates, as no property will be rented 100% of the time.

    It is a hazardous method to make money, and you should be well-prepared before diving into real estate.

    Do not jump into real estate investing without first doing research. 

    Buy a Variable Annuity With a Lifetime Income Rider

    A variable annuity differs from an immediate annuity because it is a long-term investment. 

    You select a portfolio of assets to invest your money in.

    You share in the profits and losses of such assets, but for a charge, you can add guarantees known as riders.  

    Do you need a rider?

    A rider is like an umbrella. You may not need it, but it will protect you in the worst-case scenario.

    Companies charge fees for riders, and they often feature variable annuities worth 3% to 4% per year8.  

    This means that to make any money, the investments must cover the costs and more.

    Before determining whether to insure a portion of your income, give it a lot of thought:

    • You will need to determine which account to buy the annuity in (an IRA or non-retirement funds).
    • Know how much tax you will pay on the income when you use it.
    • Understand what will happen to the annuity if you die.

    Keep Some Safe Investments

    Keep a portion of your retirement money in safe investment backup plans at all times. 

    Rather than generating a high current income, the primary purpose of any safe investment is to protect what you already have.

    All retirees should maintain an emergency fund. 

    Do not count this account among the assets that can ‌generate retirement income. 

    It serves as a safety net or a resource for unexpected expenses that may arise during retirement.

    Invest in Income Producing Closed-End Funds

    A closed-end fund9 is an investment business that sells shares in an initial public offering (IPO). 

    It gains securities with the capital they raise. The business then sells its stock on the open market.

    Closed-end funds do not have any inflows or outflows; income is generated on a monthly or quarterly basis. 

    Interest, dividends, and, in some situations, a return of principle can all contribute to income.

    Before you make a purchase.

    Make sure you do your homework before making a purchase.

    Closed-end funds may be a good investment for a portion of a retiree's money for experienced investors. 

    Less experienced investors should avoid them or invest in them through a closed-end fund portfolio manager.

    Invest in Dividends and Dividend Income Funds

    Invest in a dividend income fund instead of buying individual dividend-paying equities.

    Managers of these funds own and manage dividend-paying stocks on your behalf. 

    Dividends10 can provide a consistent stream of retirement income that can increase year after year if corporations boost their dividend payouts.

    Dividends can, however, be cut or stopped entirely during difficult economic times.

    Dividend-paying companies and funds with higher-than-average yields should be avoided. 

    High yields ‌come with a hefty price tag. When something pays you a much higher yield, it is to reward you for taking on more risk. 

    Do not invest unless you are aware of the risks you are taking.

    Place Capital into Real Estate Investment Trusts (REITs)

    A real estate investment trust (REIT)11, is like a mutual fund that invests in real estate. 

    A team of specialists collects rent, pays expenditures, collects management fees, and distributes the leftover revenue to property investors.

    Apartment complexes, office buildings, and hotels/motels are examples of REITs that specialise in 1 property category. 

    REITs can be a good retirement investment if they are part of a well-diversified portfolio. 

    Because of the tax characteristics of REIT income, it could be advisable to keep this form of investment in a tax-deferred retirement account like an IRA. 

    Other Investments

    Other investments have always existed, but they have gained in popularity in recent years. 

    Some people, for example, choose to invest in precious metals such as gold and silver, particularly during times of uncertainty.

    Many alternative assets can generate high returns. 

    However, because their value has varied significantly, you should be wary of relying on them for long-term retirement planning.

    Antiques, art, wine, stamps, and historic autos are among the other asset classes. 

    Expert knowledge is required for all of them, and markets are prone to significant volatility.

    Another disadvantage is that without dividends, you are more likely to have to sell part or all of your assets in order to make a profit.

    How Should You Alter Your Investment Strategy as You Get Closer to Retirement?

    You should adjust your investment strategy to safer, income-oriented assets as you approach retirement. 

    Riskier investments, such as equities, ‌outperform over time, but individuals nearing retirement may not have the time to recoup. 

    People frequently migrate money out of stocks and into safer investments that offer consistent income as their timetable shortens.

    Common Questions

    Property vs Pension: What is the Best Retirement Investment?

    Are Pensions a Safe Retirement Investment Vehicle?

    How Often Should I Review My Investments?

    What Are the Best Retirement Investments in the UK?

    How to Choose the Best Retirement Investments?

    Are Bonds Good for Best Retirement Investments?

    What Types of Stocks Make the Best Retirement Investments?

    Which Mutual Funds Are Considered as the Best Retirement Investments?

    In Conclusion

    There are many options available to finance your retirement.  

    With increases in life expectancy, people may ‌retire for anything from 20 to 30 years12.

    It is, therefore, vital that you explore the pros and cons of various investment options to ensure you have enough money to fund your retirement.

    Building a diversified portfolio of investments that includes a combination of the options in this article is the best retirement investment option.

    Seek advice from a professional financial advisor to help you build a diversified portfolio that fits your budget and retirement income goals.

    Review your portfolio regularly and make any adjustments to stay on track for your best retirement investment goals.

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